Foreign Transaction Fees: What To Know And How To Avoid Them (2024)

A foreign transaction fee is a fee charged by a credit card issuer or bank for every transaction made in a country outside of Canada. Fees vary depending on the credit card or bank’s terms and conditions, but are typically 2.5% of the purchase amount. Always check a card’s terms before assuming anything—especially when it comes to fees.

Payment processing networks like Visa, Mastercard and American Express may also charge international fees. Card issuers can opt to exclude this fee from card terms but if not, the network’s fee will be tacked on to any fee charged by the issuer.

Foreign transaction fees may show up as separate charges on your billing statement or be rolled into the credit card charge.

In Canada, foreign transaction fees are typically around 2.5%.

A foreign transaction fee is typically calculated by adding the predetermined fee percentage charged by your credit card issuer to a purchase made with a foreign merchant to the cost of the original purchase. For example, if you’re making a purchase in another country that is the equivalent of $100 and you pay for it with a card that has a 2.5% foreign transaction fee, your total cost will be $102.50. Note that foreign transaction fees are charged in addition to any currency conversion feescharged and are not the same thing.

Types of Transactions Subject to Foreign Transaction Fees

Any purchase made at a store, restaurant or other vendor outside of Canada may be subject to a foreign transaction fee if your credit card has one. Many establishments frequented by tourists will offer the option of paying in your home currency. Be wary of this option, as the currency conversion rates are almost always worse than the rates you would get if you simply processed the charge in local currency and you will still be charged a foreign transaction fee on top of that.

A good rule of thumb is to have the card charged in the local currency to avoid conversion fees and to choose a card that doesn’t charge foreign transaction fees for all purchases made abroad.

Cash withdrawals from international ATMs are also subject to fees. In addition to ATM transaction fees, conversion fees may also be tacked on by the ATM’s operator.

Online purchases on an international shopping website may also incur foreign transaction fees, especially if thepayment processor is an international bank or institution. This includes buying airline tickets from an international airline, even if the transaction is made in Canadian dollars.

Several options exist to help you avoid foreign transaction fees when you travel abroad.

Apply for a Credit Card With No Foreign Transaction Fees

While most credit cards charge a foreign transaction fee while buying outside of Canada, there are credit cards that offer cardholders the ability to swipe without incurring a foreign transaction fee. These cards present the easiest and safest strategy when making purchases abroad.

Check out our list of the Best No Foreign Transaction Fee Credit Cards in Canada for a list of options.

Credit cards without foreign transaction fees are useful both abroad and at home while shopping online from an international website. Many cards even offer rewards that can be used for future travel or help defray the cost of everyday purchases.

Perhaps the biggest advantage to using a credit card with no foreign transaction fees during your travels is that, even if credit card information is copied or stolen, it’s relatively easy to report fraud and quickly get back stolen funds from a credit card issuer.

Our highest ranking travel credit card that doesn’t charge foreign transaction fees is the Scotiabank Gold American Express, offering a welcome bonus of 40,000 Scene+ points, plus an earn rate of 6 Scene+ points per dollar spent on groceries, and 5 Scene+ points per dollar spent on dining and entertainment. You’ll also get the benefit of being an American Express cardholder, such as Amex Offers, Amex Front of the Line and American Express Invites.

Get a No-Fee Chequing Account or Prepaid Card with No Foreign Transaction Fees

Pairing a prepaid card without international fees with a similar credit card makes a great combo for a frequent traveller. Even on its own, a prepaid card that doesn’t charge foreign transaction fees is useful for making everyday purchases and withdrawing money from ATMs in advance and loading it on to the card. Several prepaid cards in Canada don’t charge foreign transaction fees and some can be paired with a no-fee bank account. These include the EQ Bank Card, the KOHO Prepaid Mastercard and the KOHO Extra Prepaid Mastercard. Travellers should use prepaid cards in lieu of using a credit card to withdraw cash from an ATM due to high cash advance fees. To see more prepaid options, check out our list of the best prepaid credit cards in Canada.

There is also a great selection of no-fee chequing accounts in Canada that waive fees for basic services like debit transactions, ATM withdrawals and e-transfers. Some even waive foreign transition fees.

If you frequently cross the border the U.S., a U.S. bank account for Canadians and U.S. linked credit card, such as RBC Visa Signature Black, will save you on foreign transaction fees while earning rewards.

Although using a debit card can be convenient, debit cards offer less protection against fraud compared to credit cards. If debit card information is stolen, it can take much longer to receive stolen funds from the issuing bank and some account holders may see their luck run out entirely. For those travelling on a budget or who have limited available capital, this can pose significant dangers while abroad. Always report fraud right away and follow any steps the bank may require to receive funds back as quickly as possible.

Don’t Use International ATMs Without Checking the Fees First

Regardless of what type of credit or debit card is in hand, travellers should verify fees before using an international ATM. Fees to consider include the international ATM’s fee, currency conversion fees and the home bank’s fees. These fees can be avoided by choosing a bank account that doesn’t charge fees and reimburses out-of-network ATM fees and by always withdrawing local currency from ATMs. Account holders can also ask their home bank if there are partner branches or in-network ATMs in the destination country or countries.

Travellers who don’t have an account that reimburses fees may want to consider making fewer trips to the ATM and pulling out more cash each time to minimize fees. Of course, carrying around more cash also poses risk.

Exchange Cash Before Leaving Canada

One way to avoid ATM or transaction fees is to pay for a trip in cash. Travellers can exchange Canadian dollars for most major currencies at a bank, credit union or currency exchange store before a big trip. This may be a good idea if it’s easy to budget how much will be spent on dining or souvenir purchases. Banks and credit unions typically have the lowest exchange rates or fees compared to exchanging money at an airport upon arrival. We recommend exchanging currencies as far away from an airport as is feasible—rates are generally worse the closer you get to a major transportation hub.

Keep in mind, there are risks involved with carrying a large amount of cash while travelling. There’s a greater chance of losing the money or having it stolen. Be extremely careful when choosing this option and be sure to have a backup option, such as a backup credit card, so that you don’t find yourself with no way to buy food or transportation tickets. When cards are stolen, fraud protection benefits may limit a cardholder’s responsibility to $0, but when cash is stolen, there’s often no recourse.

Foreign transaction fees can be avoided safely with the right credit or prepaid card in your wallet. Apply for a credit card or chequing account that offers zero transaction fees and/or ATM rebates well before your trip to make sure there’s sufficient time to receive a credit card or account approval and obtain a new credit or debit card by mail.

If applying for a no-fee card is not an option, consider exchanging enough cash for the trip at a bank or credit union before leaving Canada. Paying for things in local currency means no transaction fees tacked onto bills. This strategy can be risky, though, so be sure to consider how to best protect yourself and your cash while travelling abroad.

As long as there’s a plan in place well ahead of time, any traveler can avoid foreign transaction fees.